I am using Ubuntu 13.10. If my laptop is infected with malware, can I get rid of it by creating a live usb on it and using that live usb format and re-install the ubuntu ? I mean is it possible that malware will find its way in live usb and hence infect the re-install ? If yes, how to get rid of it ?
It is definitely not safe. You cannot trust any drive that has been written from an infected machine.
There is no way to ensure the integrity of the live USB.
It is technically possible for malware to infect your live USB if you create that live usb from the infected pc.
Personally, I would never consider doing what you are asking to restore a system because you can never be sure you've gotten rid of all malware. However, you can attempt to create the live usb and restore your pc and once restored, simply compare the hash values of the live usb with a trusted source to see if there was any malware transferred over.
Now, the above method is still vulnerable in several ways. Namely, that some malware can hide deeper than the OS level and thus evade a clean reinstall.
Also, note that malware could transfer itself to the usb drive itself (firmware or otherwise not within the legitimate files) and it could be difficult to determine that.
Personally, I would find a trusted pc to create my backup disk. If I am paranoid (which I am), I'd sell the pc on Craigslist and get a new one.
If you have no other source (no friends or job) and do not use your pc for sensitive work (IE designing nuclear missile warheads) and only want to use your pc for gaming and/or porn, then simply creating a live usb and restoring will most likely do the trick.